Wednesday, February 17, 2010

The Georgian example

Daniel Hannan writes this morning that Georgia is moving towards a freer economy by moving in a libertarian direction:

The aristocrats of the Caucasus recently adopted something called the Liberty Act, which limits their deficit to 3 per cent of GDP and their public debt to 60 per cent. The proportion of economic activity generated by the state is capped by law at 30 per cent, and the number of government licences and permits is likewise restricted. At the same time, control of public services, including healthcare and education, is shifted from state to citizen.

Result? Georgia�s GDP is flourishing despite the Russian embargo and the recent war, and the country has continued to grow through the downturn.

Using the shortcut measure of economic freedom from the Heritage Foundation, Georgia does very well compared to its peers, though Heritage reports government spending as a share of GDP at 34% rather than 30. It ranks ahead of Vaclav Klaus' Czech Republic on that scale and 26th in the world.

With the U.S. going backwards -- Canada is now freer -- a few contenders for public office here would do well to consider the Georgian example. The Liberty Act contains a hard law requiring referenda on tax increases, and does not permit progressive taxation. The spending provisions are a bit more lax than ones we have discussed on this blog, but at least norm behavior to no greater than 3% deficits, 30% government share of GDP (at all levels) and a 60% debt-to-GDP ratio. May Mr. Saakashvili visit D.C. next!